Former executives at Washington Mutual have reached a $64 million agreement to settle a civil lawsuit with the government, according to officials with the Federal Deposit Insurance Corporation, which pursued the case after the savings and loan collapsed in 2008.
The deal is one of the larger amounts recovered in a financial crisis case, though only about $400,000 in total will be paid by the executives, according to a person briefed on the settlement but not authorized to discuss it. The F.D.I.C. initially sought $900 million in the case, which it filed in March.
Much of the settlement will come from insurance policies the company took out for the executives, who are also releasing Washington Mutual’s estate from some financial claims they have against it. The money in the settlement will be distributed among Washington Mutual’s creditors. It will not benefit the F.D.I.C. fund because the fund did not lose money when Washington Mutual foundered and was sold in part to JPMorgan Chase Company, according to F.D.I.C. officials.
The settlement, which was reported in The Wall Street Journal on Tuesday, is expected to be formally announced within the next week, the officials said.
The executives in the suit are Kerry Killinger, the company’s former chief executive; Stephen Rotella, its former president; and David C. Schneider, its former home loans president.
The F.D.I.C. accused the executives of pushing Washington Mutual, which was based in Seattle, to the brink by making risky bets to reap short-term profits for themselves. In an unusual move, the F.D.I.C. also accused the wives of Mr. Killinger and Mr. Rotella of helping them shield some of the compensation from the company from legal claims. The wives will also be released from the suit as part of the settlement.
The executives will neither admit nor deny wrongdoing in the settlement, according to another person briefed on it but not authorized to discuss it. The government has faced recent criticism over its willingness to settle cases without extracting admissions of guilt. In November, a federal judge in New York denounced that practice when he refused to approve a settlement between Citigroup and the Securities and Exchange Commission.
The Justice Department has already closed its criminal investigation into officials at Washington Mutual, saying last summer that its investigators had “concluded that the evidence does not meet the exacting standards for criminal charges in connection with the bank’s failure.”
After Washington Mutual collapsed, Mr. Schneider stayed on as a mortgage servicing executive at JPMorgan. Mr. Killinger, who ran Washington Mutual for nearly two decades, is retired. Mr. Rotella, who joined the company in 2005 to try to turn it around, is now a consultant.
In March, Mr. Rotella wrote in an e-mail to friends, which was circulated in the media, that he felt the suit was unfair and that he and other managers had been working to put Washington Mutual on a better footing by decreasing exposures to risky mortgages.
Lawyers for the executives declined to comment on Tuesday. A spokesman for JPMorgan, which is not involved in the settlement, declined to comment.
Article source: http://feeds.nytimes.com/click.phdo?i=8b74269885f40ed50d4d77703e1cf8bf
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